The £15 billion-a-year franchise sector in the UK is currently operating at record levels, with foodservice and restaurant chains leading the way. FEJ reports.
In the foodservice sector, the eight largest brands now account for some 7,700 units between them, an 11% increase compared to five years ago. There has continued to be a significant transfer of units previously owned by chains across to franchisees in a large number of brands, which has also driven the growth. The likes of Subway, KFC and McDonald’s remain among the largest franchise operators. 650 of KFC’s 870 stores are franchise-operated, for example.
Lured by the prospect of being able to manage a business without facing the typical challenges associated with a start-up — most notably financial security and brand credibility — franchising has attracted the attention of many newcomers over past few years.
A report published by the British Franchise Association and NatWest shows that the UK franchising sector now employs some 621,000 people, up 10% over the past two years. The number of franchisee-owned businesses, meanwhile, has increased 14% over the same period, topping 44,000 in 2015.
The report states: “The hotel and catering sector has shown much of that growth, particularly in the fast food sector where franchising is a key method of delivery for a number of major, household-name brands. Franchised Coffee shops have seen considerable growth over the last few years, with major brands now using franchising to grow in the UK.”
The outstanding performance of the sector, in good economic times and bad, shows the power of the franchise model and its impact on the UK’s business landscape increases each year”
In addition, the report said, there are a small number of franchises with significant unit numbers but very low turnover levels, reflecting their low investment cost and limited growth potential per unit. The performance of franchisee businesses in general also set new benchmarks last year, with 97% reporting profitability and over half turning over in excess of £250,000.
The report found that employment per unit continued its upwards trajectory, with one-third now employing 10 or more staff. There was notably a large rise in the number of units in the hotel and catering sector which tend, on average, to employ more people.
A long-term trend of very low commercial failure rates continued, with less than 1% of franchisees closing their business for this reason in the last 12 months. Franchisee-franchisor relationships are correspondingly at their strongest recorded level, with nine in 10 franchisees declaring “satisfaction” with their commercial partnerships. Home-grown success is converting into export success: four out of every five brands in the UK are domestically owned, with 38% expanding their business model overseas and a further 11% considering doing so in the future.
Brian Smart, director general of the BFA, said: “Good franchising continues to deliver serious dividends for Britain’s economy, creating businesses, jobs and wealth for local communities across the country. Established trends of strong profitability and very low failure rates over the last 20 years highlight the benefit of self-employment through franchising, a path that more and more individuals are taking. The outstanding performance of the sector, in good economic times and bad, shows the power of the franchise model and its impact on the UK’s business landscape increases each year.”
The report also suggested that more younger people are entering the franchise sector, with one in five franchisees that started their business in the past two years being under 30-years-old. It all bodes well for those entering the franchise sector to operate a foodservice concept and those in the business of supplying products and services to them.
Yum! Brands opening a staggering 2,300 restaurants a year globally
Yum! Brands, the owner of KFC and Pizza Hut, oversaw a staggering 2,365 restaurant openings globally in 2015, it has revealed. The remarkable figure is equivalent to six new stores opening for business every day somewhere in the world.
CEO, Greg Creed, said there are no plans to take the foot off the accelerator — this year it has set a target of launching nearly 2,400 new restaurants. “New-unit development continues to be a bright spot for our company,” he said.
In terms of new global restaurants opened in the past 12 months, some 743 were in China, while 54 were in India. 80% of international development occurred in emerging markets. KFC led the way with 715 openings, followed by Pizza Hut with 577. Yum! also owns the Taco Bell brand.
Creed said the recent growth drive has laid down the groundwork for future expansion at the firm. “With all of this in mind, we are reiterating the guidance we initially gave in December. Given the results we have seen year-to-date and the plans we have laid out for each of the brands, we’re confident in our ability to deliver 10% operating profit growth in constant currency in 2016.” He added: “We are 100% dedicated to building and strengthening KFC, Pizza Hut and Taco Bell all around the world, as strong brands are critical to delivering sustained growth and creating shareholder value over the long term.”
Harry Ramsden’s owners target 300 sites in five years
Harry Ramsden’s is to embark on the biggest store opening programme the chain has ever seen by launching 300 new sites over the next five years. Parent company Boparan Restaurant Holdings intends to bolster the fish and chip shop group’s UK coverage in a move that could create as many as 5,000 jobs and lead to a wealth of kitchen projects. The openings will be a mixture of both company-owned stores and franchises.
Harry Ramsden’s presently operates just over 40 UK stores so the ambitious plans would see its estate grow more than seven-fold between now and 2021. Chief executive, Joe Teixeira, said: “Following the successful turnaround of Harry Ramsden’s in the last three years, we have a clearly defined strategy driving the reinvigorated brand, focusing on customers and our people to grow aggressively offering the Harry Ramsden’s proposition to a wider demographic profile.”
One of Harry Ramsden’s flagship sites will be at the Blackpool Tower. It will take the space previously occupied by the Tower Lounge bar, while a further eatery will open within the Tower complex. The chain will invest £2m into the venture, with Blackpool Council contributing £400,000 toward building works.